Estate planning is not a one-size-fits-all, cookie cutter type of endeavor. This is one of the many reasons why it is not a good idea to try to plan your estate using a DIY software program or beginner’s guidebook.
The extent of your assets, your age, the nature of your holdings, the quality of your health, and the way that you would like to provide for your loved ones are a few of the relevant variables. Exactly how one should proceed is going to vary on a case by case basis. You do however want to familiarize yourself with all of the options that are available to you, and one of them would be the reverse mortgage.
We are not going to endorse or indict the reverse mortgage here. We would just like to let you know some of the basics and you can then decide for yourself if you would like to dig deeper.
When you take out a conventional mortgage the lender holds most of the equity at first and you essentially buy it incrementally as you make your payments. With a reverse mortgage it is the other way around. You receive payments from the lender either in increments, in a lump sum, or as an available source of liquidity that you can use on an as-needed basis in the same manner you would use a home equity line of credit. In return for the money the lender gives you it acquires equity in your home.
Once you obtain a reverse mortgage you pay nothing, so there is no risk of default like there is with conventional refinancing. You can live in the house for as long as you want to. If you pass away without ever moving, your heirs can sell the house, pay the outstanding balance on the reverse mortgage, and keep the remainder of the proceeds.
You can do the same if you choose to move and live elsewhere, but the reverse mortgage does become due and payable once the house is no longer your primary place of residence.